Value Creation Hierarchy

Every organization exists in order to create goods or services of value to a market, which requires an internal system of processes and resources to make good on its promises. The Value Creation Hierarchy (VCH) is a framework for organizing work in a way that gives the business a competitive advantage:

At the top level is the entire organization as a system, with the organization’s business units as the engines which create, sell and deliver value and generate revenue for the enterprise.  The enterprise is depicted in the context of its marketplace, resources and competitors, and general environment.  This model suggests that every organization is in fact a giant processing system, and all of its individual processes are contained somewhere in this system.

The second level is a depiction of the organization’s value creation system (VCS), which is the means by which the organization creates, sells and delivers products and services of value to the marketplace.  The value-creation level is kind of a mega-process view, with potentially a different VCS for different products and services.

The third level then divides the components of the VCS into three general types of sub-systems of Launched, Sold and Delivered.  Launched includes those processes whose purpose is to create new products and services.  Sold includes those processes that market and sell the goods and services.  And Delivered includes those many processes that get the products and services to customers and provide on-going support

At the fourth level we reach individual processes contained inside Launched, Sold or Delivered.  Often this is the level of process that people mean when they talk about “end-to-end” processes.

The fifth level then decomposes a given process into sub-processes and tasks. At this level the performer (whether human or technology or a combination) becomes visible. Sometimes people who use the word “process” are actually talking about this level, because from their vantage point, what they do is a whole process, although from the VCH view, they are well down in the weeds within a single sub-process or even a single task.

The VCH can help you if:

  1. People are confused about what scope of process work they are trying to address.
  2. Most process work is down in the weeds.
  3. There is no overarching understanding of the processes in your organization that are important.